This acquisition, the largest in Rackspace history and expected to close in June, will allow the company to provide expertise and support for the mission-critical enterprise applications that companies use to manage core functions such as manufacturing, logistics, procurement, supply chain management, customer service, HR and financial operations.
Enterprise and midmarket customers have asked Rackspace to expand its offerings to include the enterprise application management capabilities that TriCore offers at scale across ERP, business intelligence and analytics, and data warehousing and integration. These applications are powerful, but also complex and expensive to run and companies are looking for help managing and optimizing these applications to deliver the most business value.
According to industry analysts, companies spend approximately $3 billion per year on ERP, business intelligence and analytics, and database managed services. The hosted segments of these markets, which is where TriCore is focused and is a market leader, are expected to grow double digits a year going forward[1].
“Our customers are asking us to move further ‘up the stack’ by expanding our managed application capabilities,” said Jeff Cotten, president and interim CEO of Rackspace. “TriCore's services are among the best in that space and are highly complementary to ours. They will help enable us to deliver more of the services that our existing customers need, while opening the door to new opportunities across the globe.”
The TriCore management team, led by CEO Mark Clayman, has built an exemplary organization, now 513 strong, that has delivered complex IT solutions and expertise since 1999. TriCore has cultivated a technically savvy culture of high-touch customer service much like that of Rackspace. Clayman and other key members of the TriCore management team have extensive experience in application managed services, and will join Rackspace as part of the acquisition.
“TriCore and Rackspace are a great fit in terms of our cultures and we offer complementary services,” said Clayman. "We’ve worked for 18 years to develop our delivery expertise, create value for customers, and win their trust and loyalty. We are extremely excited to join the Rackspace team and leverage its brand and industry reach to continue to expand our offerings."
About 90 percent of the TriCore workforce is focused on delivering top quality customer service. Most of its 158 U.S.-based employees work in Norwell, Mass. TriCore also has offices in Berwyn, Penn., and Milwaukee, Wisc. Another 355 employees work in Gurgaon and Hyderabad, India. TriCore employees will continue to work out of the same locations where they work today.
TriCore delivers its services on infrastructure in any location the customer chooses: the customer's data center, a TriCore data center, a colocation facility, or a data center run by a hyperscale cloud provider such as Amazon Web Services™ or Microsoft® Azure®. TriCore currently serves about 275 managed service customers across a wide range of industries, including Arby’s Restaurant Group and Kelly-Moore Paints. TriCore's revenue is growing rapidly and profitably, with strong free cash flow.
Rackspace’s adviser for this transaction is BMO Capital Markets Corp. Rackspace’s transaction to acquire TriCore is expected to close in June. Financial details will not be disclosed.
